Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether a trust company can open a branch office on an Indian reserve and be considered to be resident on a reserve so as to enable Indians to qualify for exemption on their trust income by virtue of the income being connected to a reserve.
The head office of the trust company is off reserve, but the company would like to rely on paragraph 7 of IT-447 wherein it is stated that, as an exception to the general rule, it is possible for a trust to be considered resident in the jurisdiction in which the branch of the company is located.
Position TAKEN:
The trust would not be considered resident on reserve.
Reasons FOR POSITION TAKEN:
The exception in paragraph 7 of IT-447 did not contemplate the taxation of Indians.
XXXXXXXXXX 942018
December 6, 1994
Dear XXXXXXXXXX:
This is in reply to your letter of August 22, 1994 in which you requested us to confirm the conclusion you have drawn from our letter of June 20, 1994 and paragraph 7 of Interpretation Bulletin IT-447.
As you have noted, until we have further studied the effects of the Williams decision, the Department maintains its general view on trusts as expressed in IT-447, that the residence of the trust is dependent on the residence of the majority of the trustees exercising management and control of the trust. Paragraph 7 of IT-447 states an exception to the general rule which may apply where the management and control of a trust is exercised by a branch office of a company. In that case, the trust may be determined resident in the jurisdiction where the branch office is located even though the company itself is resident outside that jurisdiction. We have highlighted the word "may" since the exception will not necessarily apply to every trust with a trustee that is a branch office. The exception is intended for those situations where all of the other indicators of residence of a trust point to one jurisdiction and it is one that is different from the company's jurisdiction. In addition, the taxation of Indians was not specifically contemplated by the exception.
In our view, in determining the exemption of an Indian's income from taxation in your situation, your bank's trust company subsidiary would not fit within the exception provided for in paragraph 7 of IT-447.
The impact of the Williams' decision as it relates to trusts has not yet been determined by the Department. At the present time, we are not able to confirm that any particular arrangement will necessarily result in an exemption from taxation under the Indian Act for Indian beneficiaries.
In addition, we would like to point out that our letter of June 20, 1994 contained the information which we agreed, in our meeting of the same date, to send.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch
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